The Financial Times has a good investigation today into how hedge funds are stocking their boards with directors in the Cayman Islands who serve on hundreds of boards.
The FT did a lot of work here, analyzing thousands of SEC filings to come up with its numbers, which show hedge funds are using something like robosigners: Call them robo-directors. Like the robosigners of the foreclosure scandal, there’s no way a robo-director can serve on 567 boards of directors, as one man does, and actually exercise oversight of those funds.
It’s an important piece of reporting.
But I don’t like what the FT‘s self-imposed constraints on story length do to big stories like this. To get the whole story, you have to read through three separate articles, often repeating the same information multiple times (like how , to figure out what’s going on. A single story would be more efficient, not to mention a better read.
For instance, Story 1, on page one, is headlined “Cayman directors sit on hundreds of boards.” I know the FT has a sophisticated readership, but that doesn’t excuse it from writing nut graphs. The paper just presents the information here without telling us why it’s important.
That’s left for the other stories. Story 2 is about investors pushing hedge funds to make their governance more transparent, and Story 3 looks at the blowups of three hedge funds whose Caymans-based independent directors were criticized. There’s even a Story 4 if you include the interactive graphic and its lead-in text, and a Story 5 if you count Lex.
Even still these stories could have used more directness. The nut graph for the series is effectively this quote stuffed in the 22nd and 23rd graphs of Story 2:
Kevin Ryan, the former head of hedge fund research for ABN Amro, says: “Hedge fund governance, at this scale [with dozens of directorships], can only ever be a low level automated function, requiring the routine delegation of important fiduciary duties to junior staff.
“With a portfolio of hundreds of funds, it is physically impossible to attend more than a tiny percentage of board meetings.”
And context is in short supply in places: How many people are on these hedge fund boards? Do they meet in the Caymans? How often do they meet? How big are these boards typically? Are the Cayman robo-directors the only ones on the board or are there other members? We’re not told.
This is a good piece of watchdog reporting, but the presentation of the findings leaves a lot to be desired.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.